Jalco Financial Services (P) Ltd., New Delhi V. ITO, New Delhi

ITA 2250/DEL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74168 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-12-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 12-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Keywords: Principle of natural justice; Accommodation entries
• Section: 148

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI G. D. AGARWAL, HONBLE VICE PRESIDENT AND SHRI A. T. VARKEY, JUDICIAL MEMBER I TA NO. 2250 /DEL/ 2010 (ASSESSMENT YEAR: 2001 - 02 ) JALCO FINANCIAL SERVICES (P) LTD., K - 7B, GROUND FLOOR, KALKAJI, NEW DELHI PAN AAACJ2791E VS. INCOME TAX OFFICER, WARD - 4(1), NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : RAJESH DUREJA, ADV. RESPONDENT BY: S. N. BHATIA, SR. DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - VII, NEW DELHI DATED 17.03.2010 FOR THE ASSESSMENT YEAR 2001 - 02 . 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS: - 1. THAT THE ORDER OF THE LD CIT(A) IS BAD AND I S AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE LD CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 500,000/ - MADE U/S 68 OF THE INCOME TAX ACT, 1961. 3. THAT THE ASSESSEE HAS NOT BEEN AFFORDED ANY OPPORTUNITY FOR REBUTTING THE EVIDENCES ON WHICH THE LD. ASSESSING OFFICER HAS RELIED. FURTHER, THE ASSESSEE WAS ALSO NOT AFFORDED ANY OPPORTUNITY TO CROSS EXAMINE THE WITNESSES OF THE DEPARTMENT DESPITE SPECIFIC REQUEST BEING MADE TO THE ASSESSING OFFICER. HAVING REGARDS TO THESE FACTS AND CIRC UMSTANCES OF THE CASE THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION. 4. THAT THE LD CIT(A) HAS NOT DISTINGUISHED THE FACTS OF THE CASE LAWS RELIED UPON BY THE ASSESSEE BEFORE CONFIRMING THE ADDITION . 5. THAT IN ANY CASE AND IN VI EW OF THE MATTER, ORDER OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. ITO IN RESPECT OF ADDITION OF RS. 5000,000/ - U/S 68 IS BAD IN LAW AND UNJUSTIFIED. 6. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODIFY, AMEND OR DELETE ANY OF THE GROUNDS OF THE APPEA L AT THE TIME OF HEARING. PAGE NO. 2 3. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2001 - 02 DECLARING AN INCOME OF RS. 76,247/ - ON 31.10.200 1 . ON THE BASIS OF AN INFORMATION RECEIVED FROM DIT (INVESTIGATION) THAT THE ASSESSEE COMPANY HAS OBTAINED AN ACCOMMODATION ENTRY OF RS. 5,00,000/ - ON 22.02.2001 FROM AVINASHI SELLING AGENCY (P) LTD. ; THE CASE OF THE ASSESSEE COMPANY WAS REOPENED BY WAY OF ISSUANCE OF NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT ) . DURING THE ASSESSMENT PROCEEDING THE ASSESSEE WAS ASKED TO FURNISH JUSTIFICATION IN RESPECT TO THE SAID AMOUNT OF RS. 5,00,000/ - RECEIVED FROM M/S. ABINASHI SELLING AGENCY (P) LTD. IN REPLY, THE ASSESSEE HAD STATED THAT IT HAD NEVER ENTERED INTO ANY TRANSACTION WITH M/S. AVINASHI SELLING AGENCY (P) LTD; AND AS REGARDS CHEQUE NO. 87 5 501 DATED 23.02.2001 OF RS. 5,00,000/ - , IT WAS SUBMITTED THAT THE ASSESSEE HAD RECEIVED THE SAID CHEQUE FROM M/S GANPRIYA EXPORTS LTD , ON ACCOUNT OF RETURN OF SHARE APPLICATION MONEY PAID BY IT . IT WAS ALSO FURTHER STATED THAT , THE ASSESSEE COMPANY HAD PAID A SUM OF RS. 30,00,000/ - TO GAN PRIYA EXPORTS LTD. AS SHARE APPLICATION MONEY IN THE FY 1995 - 96 , HOWEVER, NO SHARES WERE ALLOTTED TO THE ASSESSEE TILL THE RELEVANT ASSESSMENT YEAR 2001 - 02 ; AND THEREFORE, M/S. GANPRIYA EXPORTS LTD. HAD RETURNED BACK THE SUM OF RS. 15,00,000/ - TO THE ASSESSEE COMPANY IN THE RELEVANT ASSESSMENT YEAR AND THE SAID CHEQUE NO. 875501 DATED 23.02.2001 WAS ONE OF THE SAID TRANSACTION. THE ASSESSEE COMPANY ALSO PRODUCED THE COPY OF LEDGER ACCOUNT OF SHARE APPLICATION MONEY (GANPRIYA EXPORTS) FOR THE PERIOD FROM 01.04.1995 TO 31.03.2001 AND BY DOING SO, THE ASSESSEE WANTS TO DEMONST RATE THAT THE RECEIPT OF A SUM OF RS. 5,00,000/ - VIDE CHEQUE NO. 875501 HAD BEEN SHOWN AS REFUND OF SHARE APPLICATION MONEY FROM GANPRIYA EXPORTS LTD. ON 23 .02.2001 AND NOT FROM M/S. AVINASHI SELLING AGENCY (P) LTD. ; ASSESSEE ALSO CLAIMED THAT THE SAID REC EIPT OF RS. 5,00,000/ - CANNOT BE TERMED AS ACCOMMODATION ENTRY BECAUSE IT WAS NOTHING BUT THE REFUND OF ASSESSEE S OWN MONEY , WHICH WAS ADVANCED TO GANPRIYA EXPORTS LTD. IN EARLIER YEAR , FY 1995 - 96 . THE ASSESSEE THEREFORE PLEADED THAT IF THE DEPARTMENT IS ACTING ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT , THEN THAT INFORMATION/ EVIDENCE MAY BE PROVIDED TO IT, ON WHICH THE INVESTIGATION WING HAS FORMED ITS OPINION AND THE ASSESSEE BE GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE WITNESS OF THE DEPARTMENT TO ELICIT THE TRUTH . PAGE NO. 3 4. IT WAS THE THEREFORE THE SUBMISSION OF THE LD AR THAT NEITHER THE ASSESSING OFFICER NOR THE LD CIT(A) HAS CONSIDERED THE ABOVE SUBMISSION OF THE ASSESSEE AND DID NOT CARE TO PROVIDE IT ANY INCRIMINATING EVIDENCE WHICH WAS USED AGAINST THEM TO REBUT NOR DID THEY ALLOW THE ASSESSEE TO CROSS - EXAMINE THE WITNESSES WHO HAVE DEPOSED AGAINST IT, WHICH ACCORDING TO THE LD AR IS A PATENT VIOLATION OF NATURAL JUSTICE. LD AR CONTENDED THAT SINCE THE ASSESSEE HAD TAKEN A STAND THAT IT DID N OT ENTER INTO ANY TRANSACTION WITH THE ALLEGED ENTRY OPERATOR AND THE ALLEGED CHEQUE NO 875501 WAS GIVEN TO IT BY GANPRIYA EXPORTS LTD. ON ACCOUNT OF REFUND OF SHARE APPLICATION MONEY AND NOT FROM THE ENTRY OPERATOR M/S. AVINASHI SELLING AGENCY (P) LTD THE IMPUGNED ADDITION OF RS. 5 LAKHS IS NOT VALID AND NEED TO BE DELETED. ACCORDING TO HIM THE LD ASSESSING OFFICER SIMPLY BASED HIS ASSUMPTION ON THE WRONG FACT THAT M/S. AVINASHI SELLING AGENCY (P) LTD THE ENTRY PROVIDER HAS REMITTED A SUM OF RS. 5,00,000/ - TO THE ASSESSEE COMPANY VIDE CHEQUE NO. 875501 DATED 23 . 02 .2001 WITHOUT TAKING COGNIZANCE OF THE EXPLANATION BY THE ASSESSEE ABOUT FACT THAT THE SAID AMOUNT AND CHEQUE WAS REMITTED BY GANPRIYA EXPORTS LTD. AND NOT BY THE ENTRY PROVIDER M/S. AVINASHI SELLI NG AGENCY (P) LTD . 5. THE MAIN GRIEVANCE OF THE ASSESSEE IS THAT IT WAS NOT GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE WITNESS OF THE DEPARTMENT AND/OR M/S. AVINASHI SELLING AGENCY (P) LTD ON WHOSE TESTIMONY THE DEPARTMENT ISSU ED NOTICE U/S 148 OF THE ACT TO THE ASSESSEE DESPITE THE ASSESSEES PLEA TO THE ASSESSING OFFICER TO AFFORD AN OPPORTUNITY TO THE ASSESSEE COMPANY TO CROSS - EXAMINE THE DEPONENT WHO HAD ACCUSED IT IN ORDER TO TEST THE VERACITY OF THE TESTIMONY AND TO ELICIT T HE TRUTH FROM THE WITNESS . 6. THE LD AR HAS CITED THE CASE OF GUDHUTUR BROS. VS. ITO (1960) 40 ITR 298 WHEREIN IT HAS BEEN HELD THAT DENIAL OF NATURAL JUSTICE IS ONLY A IRREGULARITY AND THE PROCEEDINGS WOULD START FROM THE STATE AT WHICH THE IRREGULARITY INTERVENED. THEREFORE, ACCORDING TO THE LD AR THE CASE MAY BE REMANDED BACK TO THE ASSESSING OFFICER SO THAT THE WITNESS ON WHOSE EVIDENCE, THE ASSESSMENT WAS RE - OPENED COULD BE CROSS - EXAMINED BY THE ASSESSEE . 7. THE LD DR RELIED UPON THE ORDER OF THE LD CIT(A). THE LD AR CONTENDED THAT THE ASSESSEE HAD IN THEIR WRITTEN SUBMISSION BEFORE THE ASSESSING OFFICER AND LD CIT(A) HAD SPECIFICALLY REQUESTED THE DEPARTMENT TO FURNISH THE INCRIMINATING EVIDENCE AGAINST IT, SO THAT THE ASSESSEE CAN REBUT/ EXPLAIN THE CORRECT FACTS. IT WAS ALSO SPECIFICALLY PAGE NO. 4 PLEADED THAT IF THE DEPARTMENT IS RELYING ON THE EVIDENCE RECEIVED FROM THE INVESTIGATION WING OF INCOME TAX DEPARTMENT THEN THAT WITNESS ON WHOSE TESTIMONY THE INVESTI GATION WING HAS FORMED ITS OPINION, SHOULD BE PRODUCED BEFORE THE ASSESSING OFFICER AND AN OPPORTUNITY BE GIVEN TO THE ASSESSEE TO CROSS - EXAMIN E HIM . HOWEVER, BOTH THE LOWER AUTHORITIES GAVE A DEAF EAR TO THE SAID PLEA OF THE ASSESSEE . 8. WE HAVE HEARD TH E RIVAL SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THE ASSESSING OFFICER HAS MENTIONED IN HIS ASSESSMENT ORDER THAT ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT, NOTICE U/S 148 WAS ISSUED. OTHER THAN THAT, IT HA S BEEN OBSERVED BY THE ASSESSING OFFICER, THAT THE ASSESSEE HAS RECEIVED A CHEQUE FOR RS. 5,00,000/ - ON 23.02.2001 FROM M/S. AVINASH SELLING AGENCY (P) LTD ; AND AN ENQUIRY WAS CONDUCTED BY THE INVESTIGATION WING OF THE DEPARTMENT REVEALED THAT THE SAID M/S . AVINASH SELLING AGENCY PVT LTD. WAS NOT CARRYING ON ANY ACTUAL BUSINESS AND FOUND TO BE ENGAGED IN THE ACTIVITIES OF PROVIDING ACCOMMODATION ENTRIES. ON THE SAID INFORMATION FROM THE INVESTIGATION WING THAT M/S . AVINASH SELLING AGENCY PVT LTD IS AN ENT RY OPERATOR AND THAT VIDE CHEQUE NO. 875501 DATED 23.02.2001 AN AMOUNT OF RS. 5,00,000/ - WAS REMITTED IN THE ACCOUNT OF THE ASSESSEE, THE ASSESSING OFFICER RE - OPENED THE ASSESSMENT. HOWEVER, THE ASSESSEE S CONSISTENT STAND FROM THE INCEPTION ITSELF WAS THA T THE CHEQUE NO. 875501 DATED 23.02.2001 WAS ISSUED BY M/S GANPRIYA EXPORTS LTD. ON ACCOUNT OF RETURN OF SHARE APPLICATION MONEY WHICH WAS PAID TO IT IN THE FY 1995 - 96 AND TO SUPPORT THIS FACT, THE ASSESSEE PRODUCED COPY OF THE LEDGER ACCOUNT OF SHARE APPL ICATION MO NEY (GANPRIYA EXPORT) FOR THE PERIOD FROM 01.04.1995 TO 31.03.2001. HOWEVER, IN THE ASSESSMENT ORDER NEITHER WE FIND ANY MENTION ABOUT THE SAID EXPLANATION AND THE SAID EVIDENCE GIVEN BY THE ASSESSEE, NOR IT HAS BE EN DISCUSSED BY THE ASSESSING OFFICER ; NEITHER DID HE FURNISH ANY INCRIMINATING EVIDENCE PROVIDED BY THE INVESTIGATION WING OF THE DEPARTMENT TO THE ASSESSEE ; NOR DID HE CONFRONT THE ASSESSEE WITH ANY SUCH MATERIAL NOR AN OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO CROSS - EXAMINE THE WITNE SS ES WHO HAVE DEPOSED AGAINST THE ASSESSEE DESPITE HAVING MADE THE SPECIFIC REQUEST FOR IT BOTH BEFORE THE ASSESSING OFFICER & CIT(A). IN KRISHANCHAND CHELLARAM (1980) 125 ITR 713, WHEREIN THE HONBLE SUPREME COURT HAS LAID DOWN THAT THE INCOME TAX AUTHORI TIES ARE BOUND TO ACCEDE TO THE REQUEST OF CROSS - EXAMINATION AND SHOULD PROVIDE THE INCRIMINATING EVIDENCE TO THE ASSESSEE TO CONTROVERT THE SAME. HERE WE FIND THE PAGE NO. 5 ASSESSING OFFICER HAS NOT ACCEDED TO THE PLEA OF ASSESSEE IN THIS BEHALF, THEREFORE WE SET ASIDE THE ORDER AND DIRECT THE ASSESSING OFFICER TO RE - ADJUDICATE THE MATTER AFTER PROVIDING THE INCRIMINATING MATERIAL USED AGAINST THE ASSESSEE FOR RE - OPENING THE ASSESSMENT FOR THE RELEVANT YEAR UNDER CONSIDERATION AND ANY OTHER EVIDENCES AGAINST IT AND IF IT IS THE TESTIMONY OF ANY PERSON OF M/S. AVINASH SELLING AGENCY PVT LTD AGAINST IT, THEN AN OPPORTUNITY TO CROSS - EXAMINE TH O SE WITNESS ES ALSO MUST BE PROVIDED TO IT. 9 . IN THE LIGHT OF THE ABOVE WE SET ASIDE THE ORDER PASSED BY THE LD ASSESSING OFFIC ER AND REMAND BACK THE MATTER TO THE FILE OF ASSESSING OFFICER TO RE - ADJUDICATE THE SAME AS STATED ABOVE. WE ALSO DIRECT THE ASSESSING OFFICER TO FOLLOW THE PRINCIPLES OF NATURAL JUSTICE BEFORE PASSING ASSESSMENT ORDER. 10 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 31 .01 .201 4 . - SD/ - - SD/ - ( G. D. AGARWAL) (A. T. VARKEY) HONBLE VICE PRESIDENT JUDICIAL MEMBER DATED 31 / 01 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI